STATE OF NEBRASKA
STATE ACCOUNTING MANUAL
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Effective |
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Section |
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Date |
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Number |
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GOVERNMENTAL
ACCOUNTING |
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2/16/04 |
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AM-002 |
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The
basic concepts presented in the Accounting Concepts section are also applied in
governmental accounting. There are
differences between Generally Accepted Accounting Principles (GAAP) for
business enterprises and for those governments as established by the
GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB). The following highlights those differences.
1. In governmental
accounting the resources of the government are accounted for in
"funds". "Funds"
are defined as an independent accounting entity with a self-balancing set of
accounts. In other words, within
each fund, the basic accounting equation (Assets = Liabilities + Equity)
still applies. Funds are categorized
into fund types each of which is associated with major services provided by the
governmental unit.
2. The equity
accounts in governmental accounting are referred to as fund balance. The fund balance accounts are more of a
balancing item as contrasted to rights of owners in a business enterprise. The fund balance accounts can be divided
into unreserved fund balance accounts and reserved fund balance accounts. Unreserved fund balance is the difference
between assets, liabilities and fund reserves.
"Reserved" indicates that a portion of the fund balance is not
available for appropriation or is legally separated for a specific future use.
a. Fund balance
"designations" may be established to indicate managerial plans or
intent. For example, a portion of the
unreserved fund balance may be "designated" for future capital
equipment replacement. Designated fund
balance accounts are reported as part of the unreserved fund balance.
There
are basically three groups of funds in governmental accounting; governmental funds, proprietary funds, and
fiduciary funds.
1. Governmental funds
are often referred to as "source and use" funds. These are the funds through which most
governmental functions typically are financed.
The fund types included in this category are general, special revenue,
capital projects, debt service, and special assessment funds.
2. Proprietary funds
are sometimes referred to as "income-determining" funds. These are used to account for a government's
ongoing organizations and activities which are similar to those often found in
the private sector. The fund types
included in this category are enterprise and internal service funds.
3. Fiduciary funds
are used to account for assets held by a governmental unit in a trustee
capacity or as an agent for individuals, private organizations, governments,
and other funds. The fund types
included in this category are trust and agency funds.
a. Since agency funds
are merely clearing accounts and do not involve the measurement of expenditures
and revenues, at any given time assets should equal liabilities.
The
measurement focus in governmental accounting is on the sources and uses of
financial resources. In business
enterprise accounting the focus is on income determination (i.e. net
income). Therefore, in governmental
accounting, revenues are defined as additions to assets which do not increase
liabilities, or represent the recovery of expenditures. Expenditures are those costs incurred in
performing the governmental services as approved by the Legislature. Expenditure accounts should be determined
using item orientation with emphasis placed upon what is
purchased. The proper use of
governmental financial resources is measured within fund and program
classifications. In this way, users of
governmental financial reporting can determine:
1. what was purchased
with government resources and
2. how the items
purchased were used to provide governmental services.
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